Padma Paper Mills, Ltd v Universal Exports, Inc.
Annotate this CaseDecided on March 7, 2012
Supreme Court, Suffolk County
Padma Paper Mills, Ltd, Plaintiff,
against
Universal Exports, Inc., AVIS AFSHAR JOHN MCDONALD, JOHN DOE No.1 AND JOHN DOE # 2, Defendant.
41727-2009
Attorney for Plaintiff
Goldman, Horowitz & Cherno, LLP
Steven D. Greif, Esq.
47 Post Avenue
Westbury, New York 11590
Attorney for Defendants
Phillips, Weiner, Artura & Cox
165 So. Wellwood Avenue
Lindenhurst, New York 11757-4902
Emily Pines, J.
Defendants, Universal Exports Inc ("Universal"), J & A International Inc ("J & A") and Avis Afshar ("Afshar") move, by Notice of Motion (motion sequence # 002) for an Order granting those parties partial Summary Judgment dismissing Plaintiff's Second, Third Fifth and Sixth Causes of Action. Plaintiff, Padma Paper Mills Ltd ("Padma") cross moves, by Notice of Cross Motion (motion sequence # 003) for an Order granting it Summary Judgment against the named Defendants on its claims for breach of contract and fraud in the amount of $ 131,000, the amount Plaintiff paid for "Waste Paper Hard White Envelope Cuttings" which it did not receive.
The Plaintiff makes the following allegations. Padma, a Bangladesh corporation, engaged in the business of converting waste paper into a saleable paper product, contacted a friend to locate a United States supplier pf Hard White Envelope Cuttings ("HWEC") to be converted by Plaintiff into ordinary white paper. The friend, Alim al Mamoon ("Alim") contacted a company, J & A, through its representative on May 1, 2008. On May 3, 2008, Alim received an e-mail from a "Bill Travis" purportedly of J & A, quoting a price for the HWEC of $665 per metric ton. On May 22, 2008 Bill Travis provided Alim with photographs of the HWEC (such are annexed to Plaintiff's moving papers). On May 28, 2008, Universal Exports ("Universal"), rather than J & A, submitted to Plaintiff an invoice for "Waste Paper Hard While Envelope Cuttings" for a total price of $131,000. The invoice was signed by "John McDonald" and the address for Universal at 609 Rt 109 in West Babylon, was identical to that of J & A. On June 22, 2008, Plaintiff received a Letter of Credit, to provide payment upon presentation of the shipping documents for the goods in question. The Letter of Credit specified, inter alia, that the beneficiary of the funds should certify that the quality and quantify of goods supplied are in strict conformity with the invoice. Plaintiff paid HSBC Bank $131,000 for the Letter of Credit.
When Plaintiff received the first shipment of goods, in September 2008, the goods were multicolored plates and other brightly colored paper products (photographs of which are annexed to Plaintiff's moving papers). Both Alim and Padma wrote to Universal and to Bill Travis of J & A on several occasions in September and October 2008, setting forth that the goods received were nonconforming. On November 21, 2008, the Plaintiff and Alim received the first communication from Defendant "Avis Afshar" ("Afshar") stating that the supplier was working on a proposal for Plaintiff.He also stated that the quality received [*2]was the same as that ordered and that the color waste paper could be "de inked" for $50 per metric ton. When the parties finally met, in November 2008, Padma learned of the first time that Afshar was the owner of J & A and Universal, that "Bill Travis" and "John McDonald" were fictitious names utilized to deceive customers into believing they were dealing with a U.S. corporation. Plaintiff also learned that J & A never purchased HWEC although Universal signed a certification, as required, that the goods were in strict conformity with the invoice.
Plaintiff asserts that Defendants utilized the names of fictitious persons to induce Plaintiff to do business with the corporations; that although the order was placed with J & A, Afshar turned it over to Universal, both of which he owns and utilizes interchangeably; that the corporate Defendants do not file separate tax returns; and that the Defendants' certifications with regard to the product sold, were all untrue. Thus, Plaintiff asserts it should receive the return of the $131,000 based on breach of contract and fraud, entitling it to pierce the corporate veil.
Defendants submit that there is no evidence presented that Defendants ordered merchandise other than that specified in the invoice, attaching copies to the shipping company that was to obtain the product, setting forth that such was to be "wastepaper hard white envelope clippings". In addition, Defendants move to dismiss the fraud causes of action as they are identical to those for breach of contract. With regard to those that name Afshar as an individual claiming breach of contract, fraud and piercing the corporate veil, Defendants aver that such should be dismissed first, because there is no evidence of fraud, and second, because absent evidence of knowledge of nonconformity, there is no basis to remove the protection of the corporate entity. With respect to the cause of action Plaintiff asserts for an account stated, the prerequisite invoice form Plaintiff seeing the amount set forth in the Complaint precludes such cause of action. With respect to the certifications of conforming goods, those were provided by the freight forwarder and not Afshar's corporations. With respect to the "pen names", Defendants argue that such was done for advertising purposes and is not illegal. Finally, Defendants assert that de inking can be performed for far less than Plaintiff is seeking in this case.
A party moving for Summary Judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact. Winegrad v New York University Medical Center, 64 NY2d 85, 487 NYS 2d 316 (1985); Zuckerman v [*3]City of New York, 49 NY2d 557, 427 NYS 2d 595 (1980). Once a prima facie showing is made by the movant, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish material issues of fact which require a trial. State Bank of Albany v McAuliffe, 97 AD2d 607, 467 NYS2d 933 (3d Dep't 1983).
The essential of a cause of action for fraud are 1) representation of a material fact; 2) falsity; 3) scienter; 4) deception; and 5) injury. New York Univ v Continental Ins Co, 87 NY2d 308, 639 NYS 2d 283 (1995). On the other hand, a cause of action for fraud will not lie where the sole fraud claim alleged relates to a breach of contract; in other words, a mere misrepresentation of an intention to perform is insufficient to state a cause of action for fraud. See, WIT Holding Corp v Klein, 282 AD2d 527, 724 NYS 2d 66 ( 2d Dep't 2001). Conversely, a misrepresentation of a material fact, which is collateral to the contract and serves as an inducement for the contract is sufficient to state a cause of action for fraud in the inducement. Id.
Piercing the corporate veil requires a showing that the individual defendant 1) exercised complete dominion and control over the corporation and used such control to commit a fraud or wrong against Plaintiff. See, Matter of Morris v New York State Dep't of Taxation and Finance, 82 NY2d 135, 603 NYS 2d 807 (1993).
Under the Uniform Commercial Code, where a purchaser of goods effectively revokes acceptance, he may cancel the contract and recover the purchase price, the difference in cost of replacement goods, and incidental and consequential damages. UCC §§ 2-711, 2-712, Toto We're Home LLC v Beaverhome.Com, Inc, 301 AD2d 643, 754 NYS 2d 334 (2d Dep't 2003). Even where revocation of acceptance is not available, the purchaser is not precluded from other remedies for nonconformity (UCC § 2-607(2), as long as the buyer notifies the seller within a reasonable period of time after it discovers the breach. Flick Lumber Inc v Breton Industries, Inc, 223 AD2d 779, 636 NYS 2d 1269 (3d Dep't 1996). In such instances, the buyer is entitled to the difference between the value of the goods as warranted and their value as accepted. UCC §2-607(3)(a).
In the case at bar, the Plaintiff has made out a prima face case of entitlement to Summary Judgment on its breach of contract claims against J & A, Universal and Afshar. There is no question that the goods shipped and received by Padma are [*4]nonconforming. Indeed, Afshar admitted in his deposition testimony that he offered the Plaintiff a credit on future shipments. The photographs of the goods shipped, annexed to Plaintiffs motion papers, have never been disclaimed and the difference between waste white envelope paper and the brightly colored plate material is beyond dispute. In addition, the Court finds that Plaintiff has made out a case for piercing the corporate veil to sue the individual Defendant for both breach of contract and fraud in the inducement. Afshar admitted, again in his deposition, that the names utilized by him, in his months of e-mails to Plaintiff and Plaintiff's middleman, both up to and through completion of the purchase, were utilized to aid him in business and that neither of these persons existed. It is uncontroverted that Plaintiff relied on such representations, which are collateral to the breach of contract claims, and suffered damages as a result. In addition, the evidence presented certainly demonstrates both dominion and control by Afshar over the corporate Defendants, such that he was able to utilize them to make misrepresentations to the Plaintiff. Upon shifting the burden of proof, the Defendants raise only one issue, and that is the amount of Plaintiff's damages. While the Defendants argue that the subject paper can be de inked and sold costing Plaintiff $50 per metric ton, Plaintiff is seeking return of his entire payment to Defendants in the amount of $131,000.
The Court does agree with Defendants that no cause of action for an account stated is set forth. In addition, the allegations of fraud against the corporate Defendants all arise out of the same set of facts as the breach of contract claim. Accordingly' the Defendants are entitled to partial Summary Judgment dismissing fraud claims against the corporate Defendants and the Account stated cause of action.
Plaintiff is entitled to partial Summary Judgment on its breach of contract claims against all named Defendants and its claim for fraud in the inducement, which permits piercing the corporate veil, against Afshar.
This constitutes the DECISION and ORDER of the Court. Counsel for both parties are directed to appear in Court for a final pretrial conference, with their clients available for settlement discussions on March 26, 2012. At 10 a.m..
Dated: March 7, 2012
Riverhead, New York
[*5]
Emily Pines
J. S. C.
[ ] FINAL
[ x ] NON FINAL
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